The Republic of South Sudan emerged in2011 from decades of conflict as the world’s newestindependent country, with huge state and peace buildingchallenges, and extreme institutional and socio-economicdeficits.By August 2016, South Sudan displayed all the signsof macroeconomic collapse,with output contracting, andinflation and parallel exchange market premium spiraling.Thefiscal deficit remained high, although its exact magnitudeis difficult to estimate given the lack of real timedata.The financing situation is dire. Monetization of thefiscal deficit explains to a large extent the highinflation, although there are some indications thatborrowing from theBank of South Sudan had been limited inrecent months.The current account deficit is estimated tohave narrowed to about 1.6 percent in FY2016/17 from about6.1 percent of GDP in FY2015/16.The South Sudanese Pound(SSP) continued to depreciate.Restoring peace, includingreform of the security sector, followed by efforts to reinin public sector borrowing to levels that avoid printingmoney are necessary preconditions for any stabilizationprogram.The FY17/18 National Budget aims to restoremacroeconomic stability, but lacks credibility.Even if theeconomy showed some recovery starting in 2018, projectionssuggest that poverty will continue to rise through 2019 aseconomic growth is likely to be surpassed by population growth.
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